Planes flying over the North Atlantic, where the Arctic and Caribbean air currents collide, are generally accustomed to heavy turbulence. But there is something new happening in that airspace that is creating profound turbulence on the ground: The EU is now counting those planes’ greenhouse gas emissions. The aviation industry is about to be added to the thousands of industrial sites subject to the emission limits of the Kyoto Protocol.

For the first time, U.S. and other foreign airlines will be asked to pay for their contribution to climate change, shaking up the globally intertwined aviation industry like never before, and threatening a trade war in the skies. American air carriers are fighting back. Led by three U.S. airlines – United, Continental and American, as well as the Air Transport Association – they have filed a legal challenge at the European Court of Justice to Europe’s efforts to slow the contribution of airplanes to climate change. An initial opinion on the case by the court’s top judge will be issued tomorrow; a final decision is expected early next year.

What’s the true cost of flying?

Aviation, according to the EU, now contributes some three to four percent to the atmospheric load of greenhouse gases—a fraction that is expected to grow exponentially over the next forty years. New science suggests there may be an additional burden to the atmosphere from airplane’s disruption of cloud patterns, which could be intensifying the greenhouse effect. Take a flight tomorrow, say, from New York to Beijing or San Francisco, and no one will be counting your greenhouse gas emissions. Take that same plane, though, from New York to London (770 kilograms) or Paris (834 kilograms), or any other European city, and the airlines would have to file those emission allowances. The actual per-ticket cost is itself a topic of dispute. The EU asserts that the cost of compliance would be no more than $6 to $10 per ticket, depending on the flight’s duration. The International Air Transport Association claims that it could add from $21 to $45 per ticket. That figure, the EU claims, is only if the airlines pass on the entire cost of their free allowances, which are expected to remain at 85 percent of the total until at least 2020. Unlike any other single industry, aviation shines a light on one of the fundamental facts of climate change: Wherever greenhouse gases are emitted, they end up in our shared atmosphere. The trans-Atlantic air corridor is traversed daily by scores of flights to and from Europe and the United States, making this the first trade-related dispute over how to deal with the vast costs of climate change and testing the ability of governments to restrain emissions beyond their borders. Thus there arises the central question at the heart of the legal debate at the European Court of Justice in Luxembourg: Who, if anyone, has jurisdiction over greenhouse gas pollution in the air?

Worldwide aerial battle over Europe

Last week, the EU started the process of allocating 221 million tons of emission allowances, to be divided up by airlines depending on their traffic with Europe. The aim is to reduce emissions by about five percent over the coming eight years, a far slower decline than what’s called for by the Kyoto Protocol. Eighty-five percent of the allowances are free; the remaining fifteen percent must be purchased, at a reigning carbon price of roughly $15/ton.

In January, they’ll have to start filing those allowances for every flight landing in or taking off from a European airport. The carriers assert that the EU’s directive violates principles of free navigation embodied in the Open Skies deal of 2007 that opened European and American air travel to competition, and the Chicago Convention, a longstanding bulwark of international travel rules. This legal challenge pits the U.S. airlines against a vast coalition of countries, agencies, and environmental groups. That coalition includes the 27 member countries of the European Union, as well as Norway, Iceland and Switzerland (which collectively represent a far larger economy than the United States), the British Civil Aviation Authority (the case was originally filed in Britain, which has responsibility for U.S. carriers in the EU scheme), and an array of U.S. and European environmental organizations--including the Environmental Defense Fund, Earthjustice, and the World Wildlife Fund-UK. Also going against the airlines are most European carriers, like British Airways and Air France, which have been living with the system already governing intra-European flights since January of this year, and have a clear interest in a more level playing field.

Tim Johnson, Director of the London-based Aviation and Environment Federation, another of the environmental groups supporting the EU, comments, “They want American carriers in the scheme so there will be no competitive disadvantage.”

The battle lines are already being drawn. Sitting in the courtroom during oral arguments at the court last July were representatives from the United States, China and India, all of which have threatened retaliatory measures if the airlines lose.

Over the same week of Sept. 26, when the EU announced its free emission allocations to the world’s airlines – United, American and Continental among them – representatives of the U.S. State Department and FAA were holding a meeting in Delhi with their Indian counterparts to develop a united front opposing the EU’s initiative. Thus far, some twenty countries, including Brazil, Canada, Korea, Russia, South Africa, Saudi Arabia, Qatar, the Philippines and Paraguay have indicated they’d sign on to the U.S.-India coalition. Meanwhile, in July, the U.S. House of Representatives passed a measure authored by Republican John Mica, Chair of the Transportation Committee, that would specifically prohibit U.S. carriers from complying with the EU’s initiative – which, if passed by the Senate, would provide U.S. carriers with a no-win option of either complying with American or European law, but not both. “If the airlines go to the mat on this,” said Gabriel Sanchez, a Senior Research Fellow at the International Aviation Law Institute at De Paul University in Chicago, “there’s no longer going to be a ‘law’-war, there’s going to be a trade war.”

Who owns the skies?

The airlines and the Obama administration assert that the proper place to apply airline greenhouse gas limits is at the UN’s International Civil Aviation Organization, assigned responsibility for the issue by the Kyoto Protocol. The EU and its allies counter that its efforts to do so over the past decade have been repeatedly foiled by U.S. and industry pressure.

“Over and over, the U.S. has blocked efforts on emission limits at the International Civil Aviation Organization,” said Annie Petsonk, who has participated with the legal defense of the EU as international counsel to the Environmental Defense Fund. “And the ICAO did essentially nothing. The EU got fed up with getting nowhere and said, ‘Okay we’re going to start to regulate.’ ”

The airlines now accuse Europe of trying to act as the airspace regulator of the world. At the Luxemburg court, the Americancarrier’s lawyer lawyer conjured a hypothetical flight from San Francisco to London’s Heathrow airport, the most popular destination for Europe-bound flights from the United States. Over the course of the flight, he told the court, 29 percent of the emissions take place in U.S. airspace; 37 percent in Canadian airspace; another 25 percent over the high seas; and just 9 percent in the airspace of Europe. The EU responds that they’re not regulating what airlines do in international airspace. Instead, they’re asking airlines to deal with climate change if they want to utilize European airports.

What’s more, they’ve argued that the principle of extra-territoriality is a familiar one as applied by the United States. After the Exxon Valdez oil spill, for example, the U.S. unilaterally declared that only double-hulled tankers would be permitted to dock at American ports (a move ultimately followed by the EU). Similarly, shortly after the terrorist attacks of 9/11, the U.S. demanded, and obtained, European compliance with a requirement that it submit the names of passengers embarking from European airports to U.S. Customs, and to impose security procedures for U.S. bound flights that mirror almost precisely the security at U.S. airports. Just as the United States determined that in the wake of 9/11 U.S. security precautions should be extended globally, the EU has determined that the urgency of climate change requires a similarly global response.

What happens in the airspace over the North Atlantic, and how the European Court of Justice handles the contribution that the greenhouse gases emitted there make to climate change, has in many ways become a stand-in for the airspace of the world—a distinction in the sky that is, of course, not a natural but diplomatic creation. When the world’s diplomats convene in Durban in late November for another round of climate negotiations, they will most likely be contending with the European Union as the sole government demonstrating a sustained commitment to the global principles of the (about to expire) Kyoto Protocol. Few new global initiatives are expected, leaving individual governments to devise their own widely varying approaches to climate change. The dispute in Luxemburg could be the harbinger of tensions to come.